Crowning glory: Watches of Switzerland Group keeps its eye on the throne as it opens Europe's largest Rolex boutique

In this second episode of the Luxury Society Podcast, Robin Swithinbank and David Sadigh dive deep into the ever-evolving world of luxury as they are joined by Brian Duffy, CEO of Watches of Switzerland, who gives a rare behind-the-curtain view of Europe’s largest Rolex boutique, the state of global watch demand, and the future of luxury retail.

In this episode: 

• Rolex’s retail revolution: Why Watches of Switzerland invested tens of millions into a new Rolex flagship & certified pre-owned watches and the psychology of the Rolex buyers
• Market Trends vs. Reality: Is the luxury watch market in decline or stronger than ever?
• Spotlight on China: Debunking myths around the Chinese luxury market & the rise of Daigou: friend or foe to luxury brands?
• Brand Power & Retail Resilience: Why Rolex and Patek Philippe remain unstoppable revenue drivers
• Digital Strategy & Storytelling: What the Hodinkee acquisition means for future digital growth
• Strategic Moves & Business Health: The rationale behind the group’s £25 million share buyback

Brought to you by https://digitalluxurygroup.com/ 

Follow us @digitalluxurygroup & @robin_swithinbank on Instagram

Produced by Juliet Fallowfield, 2025 www.fallowfieldmason.com

Transcript

Robin Swithinbank: [00:00:00] Hello and welcome to the Luxury Society Podcast, brought to you by Digital Luxury Group. I'm your host, Robin Swithinbank

David Sadigh: and I'm your co-host, David Sadigh.

Robin Swithinbank: In this podcast, David and I cast our eyes over the business of luxury, breaking down the trends that color your Instagram feeds, and unpacking the stories and strategies that shape what happens behind the facade of the world's glitziest and most glamorous industry. In this week's episode, we're going to be interviewing one of the world's.

Leading luxury watch retailers and asking him about the tens of millions of dollars, he's just sunk into Europe's largest Rolex boutique and why he believes that an industry with rapidly shrinking exports is in fact in rude health. Later on we'll be debunking the myth that the Chinese luxury market is on a permanent go low and sticking with China, getting inside daegu.

The country's fast growing gray market channel friend or foe. The answer's not as simple as it might seem, right? Let's get to it. David,

David Sadigh: On with the show

Robin Swithinbank: say, um, I'm in at that point.

David Sadigh: I am in on with the show.

Robin Swithinbank: Say, say I'm in, but with a slightly less emphasis.

David Sadigh: And then on with the show or just, I'm in,

Robin Swithinbank: I'm in.

David Sadigh: I'm in,

Robin Swithinbank: And now just say I'm in.

David Sadigh: I'm in. 

 [00:01:00] 

Brian Duffy: Everybody wants to watch that sort of belief that everybody wants to watch. And if you have time to think about it and, and, uh, act on those thoughts you buy. And that's what happened. So demand went up, and supply went down, and the market went a little crazy. Um, unsustainably. 

And um, we actually negotiated, uh, renegotiated our, our finance availability and we have hundreds of millions of, uh, of cash available.

 um, in compared to any other historical norm, um, uh, this is a, a, a very, very strong period for demand in Rolex.

we've known and admired Hodinkee for many years. Uh, Ben Clymer was probably the first person we spoke to about, uh, about the American market. 

you've seen the finishing that's there and the amount of money that's been spent.

So a lot of capital, but no question. It will be a, it'll be worth it.

Robin Swithinbank: Now before we get into the interview with Brian Duffy, it turns out that a week is a long time in luxury to borrow phrase. So a bit of a caveat. David and I spoke with Brian Duffy in the last week of March, which we knew was before watches and wonders. But of course what we didn't know was that it was before President Trump announced a set of whinging trade tariffs that have sent the world's markets into a spin.

And of course, with them. Watch the Switzerland group's share price. So, uh, we've seen this for LVMH and richemont sWatch Group Kering and countless other listed companies in luxury and beyond. Um, so when the, when we recorded as of course, was the case with Antoine Pat in our first episode, there was little sense of what was to come.

I'm gonna say that sentence again. So when we recorded and as was the case with Anton Pat in our first episode, there was very little sense of what was to come. So David, we're [00:02:00] in this obviously globalized, interconnected, entirely codependent world luxury now faces the same challenges as any other industry as a result.

So how are you expecting brands to respond? Spa,

David Sadigh: Well, first of all, I think what happened to us in the. PO in this podcast is exactly a, a good illustration of the world we are living to, right? It's like from one week to the other. You can have like major news like, uh, coming and some kind of, uh, black swan. Uh, of course people were expecting tariffs.

But like, uh, in Switzerland, uh, we were not, uh, uh, really like, uh. Uh, buying the scenario of like more than 30% of, uh, of taxes. Uh, there is a high level of capacity. Uh, no one fully understand, uh, how those tariffs will work effectively and, uh, when they are going to, uh, to be like, uh, fully implemented. So I think it's, it's kind of difficult to get a crystal ball.

Uh, I really like the, the Bernstein, uh, uh, uh, Luka and his team did an analysis saying that, uh, uh, the tariff from the luxury goods are negligible. Uh, that luxury players have already been paying tariff for decades when exporting to the US that led the goods and fashion company [00:03:00] paid 15%. That if the 20% new tariff include this, we are discussing nothing.

So that's like one point of view. And obviously, uh, you have the opposite point of view, which is the nervousness you can feel around the watches and Wonder Salon. Uh, what's your take, Robin?

Robin Swithinbank: Yeah, that's, that's, that's a strange, creates a strangely polarized landscape, I guess, because the, well, the view, certainly from the Swiss based brands that I've been speaking to over the past 36 hours, we're recording on Friday, the 4th of April, I should probably say at this point. Uh, which is, uh, day four of watches and Wonders.

Uh, and we've, I've had two days worth of conversations now where the Swiss based brands have expressed, uh, very significant nervousness, obviously. Um. One or two of them have been really quite, uh, drawn in the face as a consequence of some of the stresses and strains that are gonna be put on their business because of these tariffs.

Um, and yet that, that analysis from Bernstein suggests that, uh, perhaps the situation is not as serious as they worry. But I mean, I would say that I've, I've probably got four takeaways from those conversations that I've had with around a dozen CEOs over the past, um, 36 hours. Um.

David Sadigh: What all.

Robin Swithinbank: first, although in the first is pretty obvious, and that's that most brands are heavily exposed in the US market, as [00:04:00] we know from from the FH S'S data Switzerland.

Switzerland's number one export, uh, country for, uh, watches by some considerable margin is the US more than China and Japan put together. Um, and so a mean, uh, many brands do a meaningful chunk of their business in the us. So some brands that I've spoken to have said as much as 40, 45% of their business is in in America, which is of course going to create significant challenges for them.

David Sadigh: Absolutely.

Robin Swithinbank: The second thing that I've heard is that a number of them called their suppliers, you know, the, the most proactive, called their suppliers at 6:00 AM on Thursday morning and told 'em to ship as much to the US as possible before the, the, the deadline kicks In my understanding, the deadline is that 10% will be on Saturday, and the remaining 21 to 22% will be next Wednesday, which is after this pod lands.

So. Um, the story still has some way to go of course, but that seems to be the picture, uh, as we currently understand it. The third thing that I heard was that most have said something pretty similar about how they're going to absorb the cost, so they'll split it three ways. I. First will be to take a bit of a hit on their margin.

Second will be to ask the retailer to do the same, assuming [00:05:00] that they're working with a third party retailer. And then of course, uh, and the brands were extremely reluctant to admit this, but in ca in some cases, they will simply have to put the prices of their watches up. Um, and that has all sorts of other ramifications.

Uh, there's a real value issue around, uh, luxury watches. At the moment. Customers are extremely value conscious, and so to put prices up again, even if it's, well, let's assume it's single digits by the point, it's been split three ways. Putting another seven or 8% on the cost of a watch is, is not gonna go down well in, in the world's largest market for, for luxury Swiss watches.

Um, but of course if they raise the prices in America, what does that do for prices of watches everywhere else in the world, they'll probably have to do something fairly similar in other markets too. And there is little appetite at the moment for increasing prices. And then the fourth, right? I think the fourth is that it, it depends a little bit on, well, it depends a lot in fact, on where you are, where you are based.

So not everyone is unhappy. Well, one or two of the CEO, or one, in fact, one in particular I spoke to said he barely slept on Wednesday night. He was so worried about it because he has a fairly, his business by comparison to some is relatively low margin. Um, but the EU based brands that I spoke to, some are based in Paris, for example, they're only gonna be subject to a [00:06:00] 20% tariff.

Um, while David Ger Davide, I should say Davide Ger of British brand, Bremont. When I spoke to him only about an hour or two ago, um, well, he was dancing from one foot to the other because he's only gonna be subject to 10% tariffs, uh, because he's based in the uk,  um, which suddenly becomes relatively trivial, uh, next to, uh, the, the tariffs paid by the Swiss brands, which he recognizes is gonna give him a competitive advantage in his, uh, in his biggest market.

So, a very complex picture, but, um, an intriguing one nonetheless.

David Sadigh: Yeah, no, that, that's  uh, that's really interesting. There, there is a second side to, to this whole story, which is basically the risk of like, uh, not only inflation going up in the US but uh, also potential recession. Uh, and I think many brands, uh. You can feel that they're also quite scared at the prospect of seeing the US markets not growing anymore or being in decline.

And I'm especially speaking for the, let's say, entry level luxury, uh, uh, Swiss watch, uh, uh, brands. Uh, and I think this situation makes it quite complicated to increase prices, right? It's very difficult to increase your prices, uh, when the economy slows down. Uh, so that would be like something quite interesting to follow and, uh, as maybe not all of our listeners know. 

Robin Swithinbank: Well, the only expression that I haven't heard is perfect storm. Um, and I'm slightly surprised not to have heard the expression [00:07:00] perfect storm from some of those CEOs I've spoken to because exactly as you've described, there's been significant inflation and, uh, every industry has been battling those.

Um, when you're talking about luxury, you're also, you've also been talking about a rapid rise in the price of gold. Which has now, you know, gone through $3,000 an ounce for the first time in history and, and we'll only, I suspect we'll only continue to rise while stock markets continue to fall. Um, so we're gonna see, uh, far fewer gold watches over the course of the next 12 to 24 months.

I imagine that's another, that's a, a different symptom, but it is nonetheless, uh, uh, one that we should recognize. Um, so I think, uh, it's, it's leaving the CEOs with some very big headaches that's, that's, uh, that's for sure.

David Sadigh: There is one interesting, uh, last question that I, uh, heard, uh, to and wonders, uh, and that is quite linked to our interview. To, uh, Brian is, uh, the impact on the certified pre on the CPO market because obviously if you assume that the price are, are going to get raised in the US market, uh, what will then be the impact on the CPO market and should we like, anticipate also a potential increase of the pre-owned market?

Robin Swithinbank: Yeah, I've actually been, uh, sent a number of, um, pieces of analysis by, uh, by researchers, uh, by [00:08:00] people, uh, looking to have their say on the matter, uh, saying the same thing, saying that pre-owned should expect a spike from now on. Um, personally I feel like I need to do a bit more research into that before I fully understand it, but, um, now might be the time to buy a pre-owned watch if you're looking for an investment.

Well look David, um, we should, uh, we should get into the main interview now. Let's, uh, we did, of course, as I said, record this before this news broke, but nonetheless, it remains a fascinating conversation with, uh, one of the world's largest retailers, which of Switzerland has revenues of 1.5 billion pounds a year.

And Brian Duffy is is an, is a very interesting man who has a very broad perspective on the way that the luxury watch industry works. So, uh, let's, uh, let's enjoy the interview.

Uh, now we're joined by Brian Duffy, CEO of the Watches of Switzerland Group, a FSE two 50 listed company that's one of the world's largest retailers of luxury watches and jewelry. Through its US and UK Network of Watches of Switzerland, mapping and web goldsmiths, mayors and beverage stores. And through the online portals, hodinkee and Specialist Vintage and pre-owned outlet analog shift.

Brian, terrific to be speaking with you. Thank you so much for joining us and coming on the Luxury [00:09:00] Society Podcast.

Brian Duffy: Yeah, my pleasure, 

Robin Swithinbank: Well, let's get straight to it. I mean, last month, uh, we, uh, had the pleasure of spending some time together at the Rolex Boutique on Bond Street, which, uh, which we believe to be people are pussyfooting around a little bit, but we believe it to be Europe's largest Rolex boutique.

Four stories of retail and servicing space. A huge investment. Um, will it be worth it?

Brian Duffy: I have no doubt that it will be worth it. Um, we, uh, we've had the Rolex Boutique on Bond Street since 1978. It's clearly an iconic, uh, luxury street of the world. Um, and we've been looking to expand our, the Rolex presence. I mean, literally for the last, uh, five, six years. Not the easiest place to find the, uh, the best location on.

And, and, uh, as time is prone, we had to be patient, uh, about it. Um, but found a great location, the ex GCI store. Beautiful, uh, beautiful building. Um, uh, really prominent and um. The demand for Rolex such a wonderful brand, um, is such that there's no question, but, uh, a lot of capital, you've seen it, you've seen the finishing that's there and the amount of money that's been spent.

So a lot of capital, but no [00:10:00] question. It will be a, it'll be worth it.

Robin Swithinbank: Yeah, no expense spare as far as I could work out. I, you, it's interesting you talk about demand because of course, as, as you know better than anybody, the watch market has cooled over the past 18 months or so after the, uh, the rush to buy watches that, uh, followed the, uh, the pandemic. And indeed in that boutique, the four exhibition purposes only signs that we, uh, that we came to know and loath, so well have, have gone.

So is that level of demand for Rolex still? Well, I suppose the question is, is it outstripping supply as far as you 

are concerned? are concerned? 

Brian Duffy: It continues to outstrip supply as it is done throughout my whole time in this business. Now, the best part  uh, of 11 years.  uh, And, uh, it really depends on what period you're comparing it to. Um. If you look at the pre covid period, so the demand, the difference between demand and supply, the secondary market pricing and so on, are all more, um, um, uh, in comparison to, to the period 2019 through to, to now, the demand is greater.

Uh, Uh, the disparity with supply is greater than secondary market. Uh, prices are, uh, are higher. But as you rightly say, there was, uh, um, the influence of the pandemic. Uh, that first of all, reduced production because of, uh, um, lockdowns in [00:11:00] Switzerland. Uh, and then are followed an increase in demand 'cause people are at home.

Everybody wants to watch that sort of belief that everybody wants to watch. And if you have time to think about it and, and, uh, act on those thoughts you buy. And that's what happened. So demand went up, and supply went down, and the market went a little crazy. Um, unsustainably. So, so if you compare the market today to that crazy period of, uh, the first half of 22, demand is less, and supply is better.

Uh, but compared to any other historical norm, um, uh, this is a, a, a very, very strong period for demand in Rolex.

Robin Swithinbank: Yeah. and and of course you've opened, well, you've devoted a whole floor to uh, to Rolex certified pre-owned. The, the lower ground floor is, is, I, I believe you've gotta have around 250 watches in stock at any one time. one time. Um, I mean, let, let's face it down there. As we all know, you will be retailing secondhand Rolexes in some cases for more than they are, uh, only a floor upstairs where of course, consumers can actually get hold of the things. I appreciate there's a, there's a a significant element in there, but, um. How long does this, phenomenon last? I mean, is is this is this going to be in perpetuity? Is there, is there always that guarantee? First of all, that when you buy a Rolex, it's gonna increase [00:12:00] in value, and secondly, if you're going downstairs at the boutique on Bond Street to buy a pre-owned Rolex, it's gonna cost you more than it would do if it were 

Brian Duffy: yeah, 

Robin Swithinbank: would do if it were

Brian Duffy: yeah, again, it's uh, if you're talking about submariners, the Daytona gmt, gts, it has been so throughout my, uh, entire time with the company and, and I think for many years before that, those products were always at premium price on the secondary market. We're never available from a stock to sell directly to clients.

So, um, if you did want to be patient and wait for the product, great, but it would've always have taken you some time. Um. So, um, I, I think it is likely to remain, uh, we do have, uh, some product available, uh, for sale, which is why we've taken those things down. And we do want people to come in and engage and look at the product and try it on, uh, and either decide to put their name on the waiting list or buy from what's available.

Uh, there. Or if they really want the, the watch of their dream or the Daytona or a, or a GMT, then they can see, um, the, the selection that we have as a, as certified, uh, pre-owned. So you have all of those options now.

David Sadigh: [00:13:00] quick one on, on that, uh, Brian, do you think that most of the customers coming to buy, uh, pre-owned, have the intent of buying a pre-owned Rolex? Or are they mostly customers looking for a new one that they cannot find?

Brian Duffy: It's a, it's a great question, and surprisingly it's the latter. It's more people coming in and saying,

you know, it's my 

Robin Swithinbank: Brian, so I'm just gonna, I'm just gonna stop there, Brian, 'cause your, um, the connection broke up slightly for me. Did it for you as well, David? Yeah,

just, um, sorry. If you could just start that answer again, Brian.

Brian Duffy: Okay. It's, uh, it's a gr great question. Uh, David, and surprisingly, it's more of the latter. It's more people coming in and, and, uh, not knowing, you know, the, the market condition and saying, you know, I wanna buy a, a watch for my husband's birthday next week. And it's at daytona. And, uh, we give them the good news and the, and the bad news, you can buy it for his birthday, but not the one next week if you're a, if you're gonna wait for a new product.

But if you do want something immediately, we have the, the pre-owned to present. So we, we, expected it to be a bit more of your typical pre-owned, uh, buyer. Uh, Uh, we'd, uh, uh, anticipated it being a bit more online because pre-owned is available online. But the, the biggest cohort that's buying are people who are coming, looking for these.

Iconic products and, uh, working them immediately and being happy to consider premium pricing.

Robin Swithinbank: You've been quoted before as saying that Rolex and Patek make up at least, if not more than half of your revenues. Excuse me. Let me ask that again. You've been quoted before as saying that Rolex and Patek Patek make up, uh, at least half your revenues. Um, and that's been the [00:14:00] case for some time as I understand it.

Just how resilient are these two brands and and which other brands, if any, indeed do you see as becoming pillars in your business in the same way these two have been for, well, certainly the 10, 12 years you've 

been in the business. 

Brian Duffy: you know, we are very proud to say that we are the, uh, the oldest retailer of Rolex. Uh, over a hundred years. Uh, we started, uh, retailing Rolex within our group in in Newcastle. Of all places in 1919. So we've had a very long and, uh, and continually building a relationship with them. Patek similarly, we go back 50 or 60 years with, uh, with Patek.

So two wonderful brands, one family owned  uh, Patek and, uh, of course Rolex, uh, uh, foundation, uh, two wonderfully managed businesses. What they've done during this period of crazy demand is be very. Um, calm and conservative about, uh, they're not at all opportunistic. They're not at all, uh, short term.

Um, their whole focus is on, uh, managing their brand and, and developing, innovating their products. So they're, they're wonderful brands that produce great products, and they're the, the two best partnerships you could possibly have in the, in this market. So we're very, very [00:15:00] lucky to have them both in the UK and in the us.

I'd put audemars piguet in that group, uh, as well. Uh, again, demand hugely exceeding, uh, exceeding supply. Um, that's a developing relationship, uh, uh, for us. We have a, um, townhouse that'll be opening in in Manchester in a couple of months time, which will be. Return to as retailing, uh, uh, in the uk. Uh, there's other brands that, um, are in high demand as well.

Brands like, uh, smaller brands like, uh, MBNF, uh, H Moser, uh, within vacheron constantin, there's a lot of products that again, we can't immediately deliver. And within Cartier, we can't get all of the Santos we're looking for. So, I mean, there's a lot of other product, uh, where again, supply is, uh, is not meeting, uh, demand overall, but, uh, the dominant.

Brands for which it applies for most of what they produce are, uh, Rolex, Patek, and the Audemars.

Robin Swithinbank: I really wanna pick up on that AP point and, and the the townhouse that you are opening and the sort of return to retailing, Audemars Piguet . I wonder if that is indicative of a much wider, uh, trend or may maybe just the sort of, the very, uh, genesis of an emerging trend. Um, the, the interesting thing about the [00:16:00] Rolex boutique as well, of course, is that it's franchised that you you operated, uh, Rolex and Patek are notoriously, uh. Not exclusively, but but almost exclusively, uh, sort of anti retail. They, they, uh, almost exclusively use retail, uh, wholesale partners around the world. I know you've taken a fairly dim view of this, of this direct to consumer model, which has seen some brands opening dozens, if not hundreds of boutiques around the world. 

Um, which of course have add, added an enormous cost burden, to the running of brands and therefore, of course, to the cost of the product at the end of the day. Um, do you, are we actually getting to a point perhaps where that model has kind of run its course and where actually we might see.

Robin Swithinbank: Brands start to return to multiple retailers like you, to, to sort of, of share the burden of of CapEx and opex expenditure.

Brian Duffy: We'll see when we, when we, we have, um, we we have a lot of interesting projects on the go again, uh, UK and the us. Um, we tend to always get the brand partnership hierarchy and lineup that, uh, that we're, we're looking for, if not a hundred percent, 90% of what we're looking for. Um, I think, you know, uh. Observation. My observation in joining this business 10 years ago was that retail wasn't living up to the [00:17:00] quality of the brands that the, um, that, uh, we were selling.

And there was clearly a need for investment, clearly a need for investment, uh, uh, uh, for expansion. And, uh, that that's what we've been progressively doing ever since very, very successfully. Um, so we've, we've, uh, never found any DTC preferences really got in the way that. There's some examples of, uh, really strong retailers, uh, with brands like Cartier, but it's a mixture of watch and jewelry and, uh, even accessories.

Um, something that we find is, uh, scale is very important, uh, in this category, uh, to have the resources, to have the capability, uh, to have the, the retail structures and, um, you know, uh, to have capabilities and, you know, digital. Activities now, social media and so on. Scale is very important. And um, obviously we have that big time here in the UK and we're building it very significantly in the US.

David Sadigh: That that was exactly my, my next question is like, uh uh, which role? Do digital, uh, activities play, uh, in the strategy of, uh, watches of Switzerland. And, uh, also I would be interested in, uh, better understanding the rationale behind the acquisition of, uh, hodinkee, uh, which I found quite interesting.

Brian Duffy: Okay. I mean, uh, I [00:18:00] think the influence of, um, digital has been huge in the market in recent years. Um, something that's, uh, very clearly happened is that as I, a much younger cohort that is now much more active in the, in buying watches, and I do think that, uh, digital. Activities, social media in particular has a big influence in the, in that younger community.

Um, overall, again, the 10 years that we've been at, our marketing has moved progressively from what you would've called traditional, um, print and outdoor and so on to progressively, um, digital activity. Um, we are active in all areas of, uh, of social media. We do do our own podcasts from, uh, from time to time, for example.

But, uh, very active on, on Facebook, Instagram, and, all of the, the obvious sites that you think about and, uh, watches are great for that. Uh, me, uh, medium, um, they're a great size. Um, uh, you can actually, um. Uh, fully present the watch. You, you can even, uh, you know, expand the presentation of the watch. Uh, we have great, you know, when we do YouTube a develops, we do quite a lot in YouTube.

We have a very high level of, um, of, uh, people sticking with the ad the whole way through. Much higher than average as, uh, Google tells us. Yeah, so I, I think this category, and [00:19:00] there's so much stories to tell about, uh, about watches, whether it's what celebrities might be wearing them or the heritage where they came from, or, or, you know, the first watch, uh, to go Everest or,

or  there.

Robin Swithinbank: Brian, it's kept, it's kept me in the job for 20 years, for 20 years, so, uh, and and hopefully another 20 years yet. years yet. that listen, um, let's, uh, shift to some of the sort of sort of the, the, the business, uh, story of what the Switzerland group and you you announced the share buyback of 25 million pounds recently. What was the thinking behind that?

Brian Duffy: Um, it is simply that, uh, you know, we, we, we came out of last year with no debt at all and, uh, quite significant, uh, facilities. Um, our share price, um, uh, for a variety of reasons. Uh, we, we judge has been significantly undervalued, um, and represented very good value for us to invest available cash. Um, it's a relative to the facilities we have, it's a relatively modest amount. 

Robin Swithinbank: with, um, Last, uh, last month the group announced a buy a share buyback of 25 million pounds. What was the thinking behind 

Brian Duffy: Uh, really it's, uh, our share price and our view is undervalued and therefore represented very good value for money for our shareholders. Quite simply, uh, we have the funds we came out of last year with, um. With no debt. Uh, we actually negotiated, uh, renegotiated our, our finance availability and we have hundreds of millions of, uh, of cash available.

And, uh, and this just, uh, what all of the advice that we've been given is that this was a sensible way on behalf of our shareholders to, uh, uh, to improve, uh, value and make a sensible investment.

Um,

and. Sorry, Brian, we're we're breaking up again Don't forget Robin, the a dinky part. We didn't let him finish just on the A dinky.

Robin Swithinbank: uh, forgive me, let's actually just circle back there

just a second if we can. Um, that's, that's fine. Let's, let's, Brian, would you mind just saying a word about Heinkey if you, if that's all right. And then, uh, and then we'll come back to the buyback question.

Brian Duffy: And hodinkee, uh, David, a great question. Uh, we've known and admired Hodinkee for many years. Uh, Ben Clymer was probably the first person we spoke to about, uh, about the American market. Always really admired the wonderful job that they [00:20:00] do. Um, and we stayed in touch. We've looked at various ways of collaboration, um, but never quite found a formula to do it.

And, um, in some respects, each went our own direction. But then we were really pleased to engage with, uh, with Ben when this opportunity of, uh, of acquiring the business came along. Um, he adds, or he and his team adds so much, I think to, uh, uh, to us. They give a tone of voice. They give an expertise. They give a wonderful.

Editorial, um, uh, uh, presentation. Wonderful content, uh, providers, uh, great connections with, uh, with celebrities and the, uh, important people in the category. And just a wonderful, passionate, uh, love of watches. Um, so we're, so, we're delighted with all of that. Um, and what it would mean business wise for us is, uh, we are now much more.

Progressively developing our online business in the US It's much, much smaller than it should be. And uh, hodinkee has a wonderful following that could never quite get access to the brands. Uh, obviously we have the brands and now we have the hodinkee following. So from a business standpoint, that's, uh. That's a, a very obvious, uh, way that we're, uh, we're going to get a, a [00:21:00] return on our investment, but love it.

I actually got Ben here, uh, this week in London, the week before, uh, watching Wonders and really enjoyed, uh, um, enjoying spending, uh, spending time with him. Lots of potential. I.

David Sadigh: Excellent. 

Robin Swithinbank: with, um, Last, uh, last month the group announced a buy a share buyback of 25 million pounds. What was the thinking behind 

Brian Duffy: Uh, really it's, uh, our share price and our view is undervalued and therefore represented very good value for money for our shareholders. Quite simply, uh, we have the funds we came out of last year with, um. With no debt. Uh, we actually negotiated, uh, renegotiated our, our finance availability and we have hundreds of millions of, uh, of cash available.

And, uh, and this just, uh, what all of the advice that we've been given is that this was a sensible way on behalf of our shareholders to, uh, uh, to improve, uh, value and make a sensible investment.  

Robin Swithinbank: Looking at the, um, the landscape as we go ahead, uh, Switzerland is, is is apparently struggling. We're seeing declining exports both, uh, by volumes and also now by values. We hear lots of stories of brands reducing production and putting staff on reduced working hours. What impact does does this have on a business like yours?

Brian Duffy: I mean, I mean directly. Um. Not much impact, uh, at all. And I think if you look at the industry overall, the impact of, uh, you know, cutbacks and production and so on, is relatively small. Of course, it doesn't affect Rolex, Patek and the, and, uh, nor Cartier nor Omega, nor nor, uh, many of the, the big brands that are there.

I. And it is just another element of this correction that, I mean, the volatility that happened over the last four or five years is unprecedented for the market to have gone so crazy in 21 and 22. Inevitably, there was a, a connection to happen after that, and that does include some brands who, [00:22:00] you know, maybe a.

Responded more opportunistically to, to the volume, increasing capacity now having to effectively, uh, adjust back again. So overall for the industry, I don't think it's a big deal. Uh, if you actually look at the, uh, compounded average growth of, uh, exports either 16 through 24 or 19 through 24. It's in line with history, but of course there was a couple of excessive years of growth and there's been a couple of years of, uh, of correction since then.

Um, the, the industry's in good health. It's in, uh, at Inwood Health and, um, and we are, you know, very optimistic about the future. I.

David Sadigh: We are hearing a lot of, uh, stories, uh, about around safety and, uh, how unsafe it has become to, uh, wear expensive or high-end watches in the cities like Paris, uh, uh, London, and to some extent some others across Europe. Um, what's your take on that, uh, Brian, and, uh, is it something that, uh, is really growing?

Brian Duffy: I, I don't think it is growing as much as the media would suggest. You know, I, I think inevitably it's a, it's a subject that does get media attention, does get headlines, and therefore I think the, the. [00:23:00] The impression that's out there in, in the marketplace is worse certainly than anything that we are aware of or, or experienced directly.

That being said, the average price of um, uh, watches has gone up significantly. Um, and even if you look at the, uh, the inflation because of gold, simply, um, a lot of gold watches, so the average price has gone up significantly. And, um, and therefore, you know, people have to be careful when it, uh, is it any different to.

Senior women don't wear a diamond tie. You know, if you're out, if you're out shopping and, and therefore don't show off, you're a, your gold watch. So personally, I I, I've never stopped wearing, um, any expensive watches, but I'm conscious if I'm in public transport or whatever to, to maybe keep it covered and not keep it visible.

So I think you just gotta be sensible. Um, the only thing that we've done is, uh, we have introduced, um, uh, an insurance, um, whereby. Uh, clients, if they simply, uh, indicate that they'd be happy for us to contact them about insurance, they would be immediately covered, uh, before even, uh, leaving the store for 30 days

David Sadigh: That's clever. 

Brian Duffy: Yeah. And I think that does give a reassurance and, um, um, so it's happening. It's, uh, you know, not just in the, not just in [00:24:00] watches. There is more insecurity generally, um, out there in the cities today and, and, uh, that maybe watches are, are an obvious target. But I do think the impression of, uh, of, uh, the, the problems out there are much greater than the reality.

Robin Swithinbank: Well talking of reassurance, we, as you've already alluded to, are recording to, this just a few days before watches and Wonder Geneva kicks off, and, uh, this episode will be dropping on the first day of the show. Um, do you expect the show to give the industry, to give retailers, to give Well, the the many stakeholders in the industry, the sort of reassurance that actually the industry really needs at the moment.

Brian Duffy: We are, we are very excited and obviously we've seen some of what's coming. Uh, there's quite a few of the brands that do meters beforehand and, uh, which is very good because it means we are then much more prepared to maybe talk about launch activities or the volumes or whatever it may be. So we have been anticipating, and I'm sure we're not gonna be disappointed of, of a very, very positive, uh, Watch & Wonders, I think over the last few years because of this, you know, demand supply imbalance that there's been, because the market's been so strong, it has, you know, deemphasided new products to some extent.

If you can't produce a. [00:25:00] Everything that their customers want today. Why complicate things by introducing a, uh, a large volume of new product? Um, so as a market settles down, new product gets back to be very important again, uh, whether it's simply, um, you know, uh, new colours, new materials, new movements, whatever it may be.

Um, so we are a, we are very positive about, uh, what's what we're gonna see over the next week. Uh, we also think there's gonna be a western. Focus, uh, on it where we are, the two major hemispheres, obviously, uh, a bit a, a significantly different taste, you know, between the two hemispheres. Um, but, um, the real, the market is growing fastest, uh, uh, by far, uh, in the world and, and in the western world, obviously the US market, uh, which is very much, you know, common taste for the uk.

So we, we are expecting our markets even to get an even more favorable, you know, outcome when it comes to a new product. So. Very, very excited to get there next week.

David Sadigh: And speaking just about consumer behavior, uh, what are some of the changes you have seen or noticed in the last, let's say, three to five years, uh, that you believe are maybe not, uh. Fully, uh, understood or grasped by the brand or the industry.

Brian Duffy: I mean, [00:26:00] honestly, not much I'd put in that category. I think it's a wonderful industry, uh, very, very well resource, uh, resourced. A lot of great research goes on. A lot of great product development that happens. Um, we do spot opportunities, but, um, uh, they tend to be, you know, uh, dial and case size combinations or, um, or, you know, different color, maybe different strap combinations and so on.

David Sadigh: Genderless, maybe

Brian Duffy: I'm sorry.

David Sadigh: genderless, maybe.

Brian Duffy:  uh, yes, yes. Good one.  I mean, there's a definite trend towards smaller case sizes for men's. There has been an ongoing, uh, trend towards women buying bigger case size. And, and to your point, yes, they've converged in the middle and something like a 38 millimeter, uh, now is, is, is completely unisex.

36 and 34, probably the same. So yes, that's a definite trend. Trend away from leather and alligator towards metal bracelets has been an ongoing one that I think will continue. Um, I think a lot more color. I think color clearly has been a, um, a great development over recent years. Started with blue and pink.

Then it's been, uh, uh, blue, then green, sorry. Um, you know, pink and other variations have come along, but I think dial treatments and [00:27:00] dial colors have, have added a whole new excitement and, uh, fashion. We had Rolex a couple of years ago doing a lot with, uh, a lot with color. Um, so, and there's new materials, ceramics getting used a lot more sapphire crystal, even in cases getting used more, uh, titanium getting used more.

So I think there's great trends that, that are there that we expect to see more of. Um.

Robin Swithinbank: Even with, even within that, even within that, Brian, I, I, one of the things that I've observed and, and partly in those watches that I've seen under embargo, which I think we can talk about now because this is gonna land on April the first, as I said. But if you think about culture's Reverso or Cartier's Tank, as you mentioned, Chanel's, J 12, Hublot 20th anniversary, big.

Bangs, the new TAG heuer Formula One. None of these are new new per se, are they? They're in fact, if anything, if anything, they're the, they're the old school designs. designs. There's a, a design flight quality. Some people have been calling it. it. that's obviously the way that brands have decided to behave. Would you say it's also reflected in consumer sentiment? Is this what customers want? They want iterations on the same old designs rather than the new and the fanciful.

Brian Duffy: I mean, yes. I mean, I, I, I think it is part of the fundamental of this industry, this celebration of [00:28:00] iconic, uh, product. Um, the submariner from 1954 to what you would see 2024, you'd recognize very much as the, uh, as the same design, the same inspiration. I think that's wonderful. And obviously a great deal has happened.

The bezel is ceramic, the movement's accurate within the plus minus two seconds, and the durability is such that it's, you know, indestructible. Um, so, you know, but I, but I think it's the iconic. Product. And, uh, this industry has got so much emotion and history and heritage associated with it, and I think it translates through to, um, iconic products, um, developing, but always being recognisable.

So I 

think it's a real positive. 

Robin Swithinbank: Yeah, and one of my observations is that nostalgia plays a very key role. In the way that brands behave and in the way that consumers behave. We and you talk about iconic designs, essentially, you know, a a, a design that was brilliant in the 1950s, sixties and seventies, has a certain nostalgia to it. If nostalgia is powerful, where does the sort of dynamism come from that is fresh and new and contemporary, and that actually [00:29:00] pushes this industry forward into the 

future. 

rather than through the product itself? What do you think actually 

David Sadigh: one.

Brian Duffy: Yeah. I mean, but I, I, I mentioned color earlier. Um, and, and that's, that's definitely one I, I don't think we would've 

imagined. 

Robin Swithinbank: But it, but is it outside design? Is it more about how the brands market themselves? Is it the stories they tell the people they align themselves to? Is it the way that, I mean, on this podcast, we're gonna be talking a lot about the way that, for example, China might use team, or, or UL versus dego slash TikTok.

Um, is, is that, is that where the industry grows? Is that where it becomes more significant through, through the way that it, it behaves and tells its stories rather than through the product and innovation are are the lifeblood of 

Brian Duffy: I think it's all of the above. There is a lot of emotion as associated with, uh, buying and winning, and. Receiving a watch special occasions in your life. You, I mean, the number of people I, I, you meet that say, I, I got this watch from my grandfather, you know, and I, I want to buy a new one that's the equivalent of the Speedmaster, oh, Omega Speedmaster, Speedmaster that he gave me, uh, you know, whatever 30 years ago.

So I think there is a lot of emotion there for that lends itself. To, uh, storytelling lends itself to marketing. Um, it lends itself to modern marketing, you know, ambassadors. I mean, I think today, uh, very importantly and ambassadors that brands choose authenticity, choose people that are really interested in the watches and really associated with the brand image and so on.

But yeah, I mean, there's great marketing, uh, goes on. I, I think the technical developments of products are, are, are wonderful, the progress it's made. Materials and movements to complete, uh, assortment now of, of new movements that are in every [00:30:00] Rolex are just, uh, uh, just fantastic. And that's been what, what's it been a six or seven year program of, uh, converting onto this new generation movements.

Um. 

Robin Swithinbank: Brian, Brian, there are 101 things I'd love to ask you about, and I'm I'm conscious that you've got a 1.5 billion pound business business to run. Um, so before I, before we, before we wrap up, I'd love to get a sort of a final thought from you on this. You talked about this graph and this compound annual growth over a long period of time, it's gone up and it's gone down in a very, sort of sudden and dramatic way at various points over the past five years. is is it ever gonna stabilize? Do you see, do you see 20, 25, ever gonna stabilize? Do you see, do you see 20, 25, 26 becoming slightly more stable and maybe growth, gradual growth again at some point? Or actually is, are these extremes going to be the norm? 

Brian Duffy: No, no, No, no, no. I mean, I mean, the, the extreme was caused by Covid, uh, uh, caused by this, you know, once in a century, uh, uh, experience, uh, uh, for the world. Um, it's already settling down. Um, I, I think the, the, the worst period of correction, certainly here in the UK market, I. It would've been a second half of 23. And, uh, things have been, uh, recognizable, I would call it since then.

In terms of, uh, terms of behavior, uh, we are doing fine. Um, and, uh, we, we are, we're growing, we're investing and, and, and very optimistic about the future. So I, I think the market's already. Settle down, uh, the situation in Asia, China. Yes, there's, you know, macroeconomic, um, settling down. It's going to happen there [00:31:00] yet.

Um, but I, I've no doubt it will, doesn't influence us directly. Um, so yeah, you know, I, I graph and I, I chart I'll always love looking at  uh, uh, uh,  uh, showed the average, uh, price. Of a submariner, um, over, um, 70 years. Is it 70? Yes. 70 years. And it has increased on average 7% every year over a 70 year period.

And that's the retail price. That's not even a market price, which is we were discussing earlier is even higher. 

And that more than anything just tells me how robust and resilient this uniquely Swiss uh, business really is.

Robin Swithinbank: Wonderful. Wonderful. David, any final thoughts from you before we, uh, I think we are, I'm receiving a message that we are like, uh, having an issue in term of the recording and that we cannot record anymore. Do you get the same?

No, I don't. No, I don't. So, uh, hopefully that's not the case, but, but anyway, Brian, it's been a huge pleasure talking to you. Thank you so much for joining us on The Luxury 

Society Podcast. 

Brian Duffy: My pleasure, uh, David and Robin. Nice speaking to you.

Robin Swithinbank: Until the Great. I'll hit 

David Sadigh: We record, uh, max. 

Robin Swithinbank: Okay, next up. It's a great pleasure for David and me to welcome onto the Pod Jaques Roizen and managing director of China Consulting, DGS research and consulting business based in Shanghai. Jack joins us to discuss the performance of luxury brands in China and to help us understand a little more what's going on [00:32:00] in one of the world's luxury engine rooms.

Jack, a very warm welcome to the pod.

Jacques Roizen: Thank you very much. Very nice to be with you, Robin and David.

Robin Swithinbank: Right China. Then it, from my perspective, it feels as if China's taken a bit of a bashing, not just at the moment, but, but for the last few years, really, the sort of post pandemic China has not been as vibrant as the pre pandemic China. We hear the economies in the model. We hear consumer sentiment hasn't really recovered since the pandemic brands almost seem to be giving up on it and focusing on places like, you know, markets like the US or the Middle East, Japan. Places where the recovery has been much faster. Now, Jacque, from, from your vantage point, would you say that's what you are seeing or have we got that wrong?

Jacques Roizen: I, I think the narrative, um, gets, uh, a lot of the core facts right, but that the conclusion is wrong. And, and what I mean by that is that in 2019, the Chinese luxury consumption, and I'm talking about global consumption, um, by Chinese consumers, was 82 billion Euros. In 2024, it was 82 billion euros. Now, what happened is that in 2019, and before that as well, Chinese consumers spent two thirds of their luxury expenditure outside China and starting in 20 20, 20 21, and 2022.

Chinese consumers because of the pandemic, were not able to travel. And so the two thirds that they used to spend outside China. They started not being able to spend them outside China, and as a result, they increased their spending inside China. But the one third of 82 billion they used to spend inside China became two thirds of 82 billion.

And, and the market and, and the, and the people that cover the industry decided to focus.

Robin Swithinbank: there. Sorry. Because we just

lost you slightly. 

David Sadigh: had the lag,

Robin Swithinbank: hmm.

David Sadigh: but it was excellent.

Robin Swithinbank: it was really, it was really good. How f how frustrating that it

lagged slightly. Um, how is your, uh, how's your internet connection, Jack, where you are?

Jacques Roizen: I'm at the Hilton Hotel on the 

Robin Swithinbank: So it should be pretty solid, shouldn't it? Sorry to interrupt you there, but, uh, but yeah, just it, it sort of crackled up. So, um, so if you can sort of get back into the one third of the 80, 82 billion,

um. 

Jacques Roizen: What happened during the pandemic is that Chinese consumers not being able to travel started spending a hundred percent of their consumption, luxury consumption inside China. However, they only spent two thirds of what they used to spend and market [00:33:00] observers and financial markets decided to focus. On the performance of luxury brands inside China.

And so from that standpoint, there was a lot to celebrate because the luxury consumption inside China increased by a hundred percent. What nobody really emphasized is that in the process, the luxury industry lost a third of its Chinese consumer expenditure during covid. And so when did we start talking about China's explosive luxury growth?

When the industry lost a third of its Chinese revenue? When did we start talking about a slowdown In 2023, which is when the, um, borders reopened and Chinese consumers started traveling again. And so in 2023. The Chinese luxury consumption increased by 52%, and that's when we [00:34:00] decided to start talking about a slowdown.

And so that's why I'm saying, you know, I, I, I think you're absolutely right. When, when, when you bring up the fact that there's a. Uh, consumer confidence issue. There's a difficult job market. There's a challenging real estate market in China, and these are fundamentals that affect the growth of the market.

However, the narrative of a slowdown is, is correct in the sense that the market hasn't grown in the last five years. However, you, you can't talk about it in, you know, double digit declines. Unless you decide to purely focus on the luxury consumption inside China, which in my opinion is not the right KPI, because what we should all care.

Go ahead. 

Robin Swithinbank: interesting. I suppose one of one of the, um, the statistics that I have in my head, uh, is from the, the, the Federation of the Swiss watch industry, for example, which, uh, shows that exports of, of Swiss watches to China has routinely been done by about 25% every month for the last, well, quite some time. Um, that doesn't necessarily play into the narrative that you, you're describing. Obviously there are many, many categories and watches is only one of them. Are there other categories, therefore, that [00:35:00] have grown very, very rapidly and production in China has gone up and exports of, of luxury products to China have gone up significantly. Countering the decline in, in the Swiss watch industry exports.

Jacques Roizen: Well, Robin, listen, in 2024, the average performance of luxury brands in China was about minus 20%. 

And so, so it, you know, the watches and jewelry are not an exception. Okay. The, the, the, the, the story is that because of this redistribution of the consumption from a hundred percent in China during the pandemic to today, up to 40% outside China, ha has had an impact on this one KPI that I think is very misleading, which is the consumption of.

Luxury inside China.

Robin Swithinbank: And we talked about, um, borders reopening and Chinese outbound tourist numbers do appear to be, uh, accelerating again very quickly. And indeed some of the predictions, uh, for the number of the. The hundreds of millions of Chinese outbound to that we're gonna be seeing by sort of 2026, by 2020, uh, 2030, suggest that, um, uh, the, the two thirds that, that, that was lost, uh, to, to [00:36:00] Chinese luxury consumption will not only be replaced in the next year to five years, but actually will grow very significantly.

Would that be your expectation?

Jacques Roizen: I think there's no doubt, absolutely that the luxury consumption inside China is gonna continue to decrease this year. That the luxury consumption by Chinese consumer outside China is gonna continue to increase. The challenge is, will these numbers match our expectations? And at what point are we going to see actual growth versus the 82 billion euros of 2019?

Robin Swithinbank: Yeah. The, the world, the world, the world Tourism organization has, uh, has in 2019, it says Chinese travelers made 155 million trips abroad and spent $255 billion. Uh, those are un world tourism organization figures. Um, similarly, I, I'm just reading around this. I found a prediction that, uh, by 2028, this number would be projected to climb to 200 million. Um, the remark there was that this would solidify China's position as a global travel powerhouse. That seems very much aligned with, with your reading of, of what's happening in the Chinese luxury market.

Jacques Roizen: That's correct. The, the, the big question is to what extent, um, the, this [00:37:00] traveling, uh, by Chinese consumers outside China is gonna translate into growth of luxury expenditure. Because post pandemic in China, like in the rest of the world, there's been a redistribution of how people allocate their disposable income.

And what you're seeing is a lot of people still focused on experience and travel and uh, dining. Uh, as opposed to the, the purchase of hard goods. And so, so I think the growth you're describing is, is, is, is a, is a very legitimate projection. To what extent can you correlate that at a hundred percent to luxury consumption?

That I'm not sure.

Robin Swithinbank: Yeah, and, and there's been a generational shift really hasn't there since 2019. So in 2019, we weren't particularly concerned about the way that Gen Z was spending their money, and yet here we are six years down the line and suddenly there's an awful lot of consideration for how the. Well, people who are now 20 something are, are spending their money.

How, so in the case of the Chinese customer, uh, what are their travel plans? How are they making their travel plans? Where are they traveling to? And then when they travel, how are [00:38:00] they spending? That presumably has to be factored in at this point as well.

Jacques Roizen: Absolutely. And you know when, when the, the borders reopened, 80% of the luxury consumption outside China by Chinese consumers was taking place in Hong Kong and Macau. And so, you know, there was this shyness in terms of going abroad, right? Um, today the number one destination is Japan. Uh, where when you go to to Tokyo Luxury Stores, you see about 80% of the consumers inside the stores are Chinese consumers talking to sales associate who speak to them in Chinese.

Um. You know, where are they going next? Uh, there's a lot of, um, early signs that, uh, the Middle East is very attractive to them. Um, but I don't have a crystal ball to tell you, you know, how soon can we expect them to be back in Europe? I.

Robin Swithinbank: David, I, I, I think, uh, you wanted to come in just a moment ago. What, uh, what's your perspective on this?

David Sadigh:  uh, I, I, I was just thinking is like, um, if we follow on your idea of like, uh, luxury consumption outside of China, indeed it means we should probably attribute part of the resilience of the Japanese markets to, to Chinese travelers, uh, exactly as [00:39:00] you said, but Japanese, not alone, alone, I guess that Thailand and many other countries are also benefiting, uh, from this, uh.

Uh, let's say a, a surge of Chinese travelers. Is that correct?

Jacques Roizen: Absolutely, absolutely. Singapore has been on fire for the last three years. Uh, Thailand is growing. Uh, no, for sure.

David Sadigh: So, so does it mean that brands have to, in your experience, over invest in the Chinese market right now to ensure that they also manage to maintain their level of sales outside of China?

Jacques Roizen: So that's an excellent question because I think it's a core challenge because, you know, uh, as a consultant, uh, and an observer of the industry, it's very easy for me to, to say with conviction that, uh, if the Chinese consumer, um, uh, spends outside China. Whether she spends in China or outside China, you need to invest in China because the desirability needs to be created where she is to receive all the marketing investments.

Right. Um. And, and, and brands that are tempted to cut marketing in China, because revenue is down, are going to pay the price, [00:40:00] not just in Shanghai, Beijing, Shang do, et cetera, but also in Tokyo, in Singapore, in Hong Kong and, and in Europe. The, the challenge is that at the end of the day when you are managing a China p and l and your revenue is down.

You have to rightsize your cost structure. And so brands are currently, you know, reshuffling their p and l in order to reallocate spend, uh, outside of all their sg and a. Except marketing where the leading brands are doubling down. So, you know, you saw Chanel last year, uh, with a fantastic exhibition in Shanghai that lasted three month, uh, which was a retrospective of Coco Chanel's early work.

You saw Chanel again do a, um, uh, fashion show, a world exclusive in Hong Jo in December. And so you understand that these brands, despite their challenging performance, are understanding that they need to, to, they need to continue investing in China in order to create the [00:41:00] desirability that's gonna fuel revenue, not just in China, 

Robin Swithinbank: What are the, what I was gonna say, what are the, what are the levers that these brands need to be pulling at? I I mean, I mean, you, you mentioned various exhibitions and things, but it presumably goes much further than that. What would you commend to to, to luxury brands in terms of those levers that, that need to be, uh, pulled in order to improve performance? I.

Jacques Roizen: Uh, you know,   uh, from a cost structure standpoint, what you're seeing is brands scaling back on their investments, um, in terms of CapEx and new store openings, and you're seeing brands invest instead on creating desirability with digital marketing, with fashion shows, with exhibitions, with events, et cetera.

Um. In terms of, you know, stepping back and looking at what I believe to be one of the most under leveraged opportunity for luxury brands in China, I think there, there's, there, there's this giant called T and, and the, the challenge is that TMALL is known as an e-commerce marketplace. And when you're talking about luxury goods in China, e-commerce is less than 5% of their revenue.

And so you, you know, wh when someone says Tmall is a huge opportunity, it sounds a little bit counterintuitive. The reason I'm saying that with a lot of conviction is because [00:42:00] I don't think luxury brands should look at Tmall first and foremost as a revenue generation platform, but as a marketing platform.

Because at the end of the day, if you think about it, take any luxury brand that has a flagship store on TMALL. They don't have a single retail store, a single fashion show, a single campaign in the world at any point that gets more eyeballs every day than their TMALL flagship store. And so you're talking about the most visible consumer touchpoint and.

So, so, so, so it stops being about just generating e-commerce revenue, and it becomes about shaping the perception of the brand, especially when you take into account that luxury consumption is usually not an impulse purchase. And so there's research and the consumer, you know, digital journey. That takes place before the offline purchase of the 95% of revenue are [00:43:00] taking place through going on Red Note and going on Tmall.

And that's why it's so important to leverage your Tmall platform and flagship store in order to expose your brand and your brand universe in a very qualitative way, far beyond just regenerating revenue.

Robin Swithinbank: Would you say brands are currently under leveraged on Tmall at the moment?

Jacques Roizen: Yes, I think a lot of brands have focused their TMALL first and foremost on generating revenue, and I think it's a, it's a missed opportunity. 

Robin Swithinbank: What, what do 

you think the associated risks are? Because, um, brands will have, have looked at, TMALL, will have considered it, uh, in, presumably in the way that you've just described, but if they're underleveraged on it, presumably at some point they've decided to, to invest elsewhere. Is that because they see inherent risks in it?

And if so, what do you think those risks might be?

Jacques Roizen: So, so I, so I think we're talking about two things at the same time. The, the, the first one is there is a misconception of. Since Tmall e-commerce in China only represents 5%, it should have a proportional [00:44:00] investment, uh, to that revenue generation. Okay? That's not what I'm talking about. I completely agree with that.

What I'm talking about is the fact that. Luxury brands, by definition, have global assets, have iconic products. And even though these iconic products, for example, are never gonna be sold on TMALL to an entry-level customer, a river of diamonds from Tiffany's or the beers okay, is never gonna be sold on TMALL.

But to not feature that product, regardless of whether you put it for sale or not, to not feature that product, is to present a luxury brand. But the entry level version of that brand, and I think that's the missed opportunity because of how big a touch point it is in the Chinese market.

Robin Swithinbank: That's a gateway for Chinese consumers.

Jacques Roizen: Exactly. I.

Robin Swithinbank: Um, talking more about risks though, I mean, and not specifically about Tmall, uh, for luxury brands at the moment in China, where are the risks?

Jacques Roizen: So, so I think there are two risks. One related to what we were talking about a little bit earlier, which is [00:45:00] be careful not to scale back your marketing investment in China, because regardless of where she buys, she lives in China and the Chinese consumer needs to be stimulated in China. Um, the, the second point is from more, uh, e-commerce strategy standpoint, the, one of the biggest event of the last four years is, uh, doing TikTok, which is this livestream platform that was less than 1% of total e-commerce revenue in China.

And today in the beauty prestige category is. Over 20% of the total e-commerce revenue in China. So every luxury premium prestige brand is looking at Douyin TikTok as a fantastic revenue growth opportunity, and I think it's a gigantic trap. The reason for that is, is, is, is a double reason. The, the first one is it's impossible to make money on doing, and the reason why it's impossible to make money on doing is very simple.[00:46:00] 

In order to generate traffic, you only have two ways. The first one. Is to distribute viral videos, and you're talking about 10 to 15 videos per week. Global brands do not have the ability to do that because of the internal controls related to the image, and if you can't do that, then you have to buy traffic.

And when you buy traffic, the the cost of traffic is order of magnitude, around 40% of your revenue. Which absorbs a, a gigantic portion of your margin. And, and, you know, in comparison on TMALL, on jd.com, it's 20%. Okay? Um, and so I, I think the, the, the, the two points are, one, be careful not to reduce your investment in marketing in China.

And second, don't fall into the trap of going into, uh, a growth strategy if that revenue. Is actually not sustainable. And today, more and more of our clients are talking to us about how can you help [00:47:00] us reduce our exposure to doing TikTok because of that. The, the last point I would say on doing TikTok is that on top of it, the livestream format is very often almost exclusively discount focused, which stands completely at odds with the, the, the concept of storytelling and, and, and communication of a luxury brand.

And so, you know, aside from the fact that you can't make money and the fact that it's not good for the brand, uh, it's a great idea, which is why we don't recommend it.

Robin Swithinbank: Interesting. Okay, so TMALL more for the win. Douyin, TikTok. Be very cautious. Fascinating insights. I, I think if we could, um, just sort of, we, we've kind of looked ahead a little bit, but I, but I wonder if, based on what you've just said to us, whether there is a sort of a long-term forecast that you might be able to, to offer. You clearly feel there is a little bit of a, there's, there's a sense of change in the air, there's a little bit of optimism creeping back into the Chinese market. Does that mean 2025 is gonna be a good year, or actually, are we waiting till 26, 27 before the recovery, quote unquote actually takes place?

Jacques Roizen: So I, I, the, the first thing is 2025 is not going to be a good year in terms of year over year performance. When you look at the Chinese luxury expenditure in China. [00:48:00] Because the, the first half of the year, we're still going to record monthly negative numbers versus last year. But what you're seeing since September, 2024, every month is a year over year that is slightly less negative every month.

And so the expectation is that in the second half, now, I can't tell you whether it's September or in uh, November, but at some point in the second half of 2025, we're expecting to have touched bottom, which means that all of a sudden you're gonna have a market that will be essentially flat. And, and at that point, the best performers will be positive and the worst performers will be negative, which is gonna be a new thing.

Because if you think about it, for 20 years, the even the worst performers were double digit positive. And for the last two years, even the best performers were negative.

David Sadigh: No Jacque, I know that you know the US market quite well, and, uh, I guess you have been following the, the [00:49:00] latest news. Uh, we can see many brands, uh, thinking of, uh, amongst others, the, uh, wine and spirit, uh, uh, French brands, uh, being quite in trouble with the tariff that were implemented in the us. Uh, how does it affect China specifically and could China be some kind of alternative?

Jacques Roizen: you know, it's, it is very. Difficult for, for, for me, honestly, to, to have a perspective about what's happening outside China. But, but what I will tell you is that LVMH is the largest European employer in China. And so to a large extent, the, the, the risk that the luxury industry is exposed to in North America.

Are are very different in China. 'cause in China you know, LVMH and the luxury industry represents a true force of the industry and employment at a moment when it is very valued. And so from a macro governmental environment, it remains a, uh, a very favorable market.

Robin Swithinbank: Interesting. Thank you, Jack. Um, goodness, I, a fascinating conversation. I wish we had more time and we will of course, uh, revisit, uh, the Jack Rozen show, uh, at some point in the not too distant future, I'm sure, and I very much look forward to it. But, uh, we must, uh, we must wrap this one up today. Uh, Jack, it's been terrific talking to you.

And, uh, uh, uh, now I'm pleased to say that once again, I'm joined by, uh, D G's, partner and international client director Benedict Terce Bene. How are you, Jack? I wanted to give you a moment there. Sorry to, uh, to say goodbye. Sorry. Let's, let's, let's just record that again and see, uh, see how we get on. Well, we must, uh, we must wrap this one up. Jack, it's been great talking to you. [00:50:00] Thank you so much for joining us.

Jacques Roizen: Thank you very much. It was a pleasure to speak with you, Robin. And David.

David Sadigh: Absolute pleasure. Thank you, Jack.

Robin Swithinbank: We'll look forward to our next conversation, but in the meantime, I'm very pleased to say that I'm joined once again by D G's, partner and international client director Benedict Satter Bene. How are you? And we'll segue into segment five. Good. Great. Shaq, that was amazing.

Goodness. I, I wanted to go, I wanna get back and listen to that again and again and again so I get all

that data pumped into my brain.

'cause it's fascinating.

Jacques Roizen: Thank you very much. You're being very kind.

Robin Swithinbank: No, not at all. Uh, we must do this again. Um, I dunno what the sort of long term plan is, David, as we work through, uh,

this, uh, this, this segment we assemble it. Yeah,

but uh,

Jacques Roizen: The problem is I played all my my greatest hits, so if you wanna do a second episode, I got nothing else to tell you right now, so you're gonna have to leave in some time, you know?

Robin Swithinbank: I'm sure you do. I'm sure you do. Um, well, and, and goodness, you've obviously got a global perspective as well beyond that and that there will be plenty of opportunities, I'm sure to, to, to bring in thoughts from, uh, further around the world. But, uh, China is clearly gonna be a focus for this pod as time goes by.

So, um, I look forward to the next one, whenever that will be. I'm gonna hit stop actually, so that uh, we can have this small talk.

Yeah, I think so. Um, Julie, that's the end of, um, sorry, I should have introduced, that's the, that is the end of, uh, episode one, segment five on the download. So we will now move into episode two, segment five on the download, which is about the Chinese grain market. So I will kick this one off and then we'll roll straight into it. Uh, now I'm delighted to say that I am rejoined by Benedict Suter. In fact, it's gotta be we, I beg your partner. It's gotta be we, because we'll be soaking straight out of a segment with David. And now I'm delighted to say that we are rejoined by Benedict Suter, DGS partner and international client director for this episodes on the download.

Bene lovely to see you. Uh, what have you got for us today?

Benedicte: Lovely to see you too. 

Have you heard of the word taiku?

Robin Swithinbank: I've heard of it, and I know it's something to do with the Chinese gray market, but I, I wouldn't be able to say I'm terribly well versed in it. Um, tell me more.

Benedicte: Well, you are warming up. Indeed. It's a gray market channel that relies on individuals or groups who travel abroad to purchase luxury products that are very much in demand from Chinese consumers.

Robin Swithinbank: Presumably the appeal of this, this, this is heavily discounted prices,

Benedicte: Yeah, completely. And also because of the fact that some my times might be out of stock in the country or unavailable altogether in China, but you're right, it is completely led by price. And [00:51:00] what we have noticed thanks to the work of my colleagues at Rehab, our sister data and intelligence company in Shanghai, is that some brands are really suffering sizable discounts between the official channels on one hand.

And you know those gray market ones like Taobao, which is a little bit like eBay or Etsy and jd.com, which is a little bit more like Amazon. If I can give you an example, for instance, you know. Canada Goose, uh, that everyone know they have some of their most popular damn jackets that are selling at an average discount price, like above 30%.

Robin Swithinbank: Which is obviously quite a significant discount. But I mean, how big a deal are these channels? I mean, are the brands actually worried about them?

Benedicte: Well, the, the answer is a little bit more complex than this, but yeah. What's interesting, um, is for instance, still in 2024, the Daug channel was growing faster than official channels themself. So to give you an ID for brands like Cariter T, Van Cleef, and Arples, and they generated roughly three times more revenue.

[00:52:00] Through the Dague channels versus the official Tmobile store.

Robin Swithinbank: Goodness. Okay. That's, I mean, that starts to sound quite significant then. And should brands such as Cartier Van and and Bulgar, should they be doing everything in their power to try and control the Degus?

Benedicte: Well, they totally should. They must control them. But at the same time, what we are seeing is that. A decline in great market, like the revenue that is generated through those channel is not automatically a good sign. Let me explain. It could also be, for instance, just a sign that people are no longer interested in your brand and therefore they're not trying to, you know, acquire items via alternative channels.

Robin Swithinbank: What an incredibly awkward tension. So at the one hand, on the one hand, you don't want your. Products being sold through dego channels, through the gray market, which is something the brands have done an enormous amount of work over the past, well, 15 or so years, really to try and close down the gray market and con and to control distribution a hundred percent.

But at the same time, uh, if, if there is indeed a, a diminishing interest in, in your products on the gray market, it might actually be, uh, it might signify diminishing interest. Uh, in, in your brand, which, um, yeah, creates a very awkward tension. Okay? A lot of work to do there by the sounds of things, but, um, uh, an [00:53:00] intriguing plot.

Thank you for bringing that to us, bene we'll, um, look forward to seeing you again soon.

Benedicte: You are very welcome. Next time.

Robin Swithinbank: David, significant insights there from be, do we think that luxury brands, major luxury brands, should be worried about the increasing influence of the gray market over, over the Chinese market? Oh, no. Hang. That doesn't sound right. The gray market over the Chinese market. David, significant insights from Bernie there should, uh, these major luxury brands be genuinely worried about the increasing influence of the gray market in China. Cool. Yeah, I think, I goodness, I've, we've now been recording for just over 11 minutes. I suspect that one was slightly shorter than the last, so getting it down to three, three and a half minutes shouldn't be too much

Benedicte: Mm-hmm.

Robin Swithinbank: Uh, 

David, I opening insights from bene well, for me at least. How worried should major luxury brands be about the increasing influence of the gray market over Chinese consumer behavior patterns?

David Sadigh: I think it's a complex one, but my, my gut feeling, you know, listening and having like, uh, joined the conversation. Session today is that there is a big risk of, uh, brand losing desirability, uh, because of this like, uh, uh, surge, uh, in gray market, uh, especially in China, especially with the slowdown, especially with like, uh, other economic factors, uh, playing in.

So yes, I think it's a worrying, uh, worrying issue.

Robin Swithinbank: It was interesting talking to Brian as well. Um, great to have him on the pod and talking about, uh, this new boutique that they've got on Bond Street, as well as some wider reflections on the market. What were your takeaways from the conversation with Brian?

David Sadigh: That was the question I wanted to ask you, Robin.

Robin Swithinbank: I got there first. Go on after you.

David Sadigh: Uh, no. I think it was fascinating. Uh, remember just a couple of years back, like most of the folks, brands, [00:54:00] journalists, investors, analysts, everyone saying that, uh, maybe those multi-brand retailers were like dead. I. And like at that time, all the major brands opening boutiques, uh, retail point of sales across everywhere.

And in the meantime, a booker got acquired by Rolex. Uh, now we, uh, heard Brian saying that he has plenty of cash and he's willing to do, like, share, buy his back because he is so confident or the company is so confident about the fact that the stock is under value. Uh, time has changed, uh, quite quickly.

What do you think?

Robin Swithinbank: Yeah, I think it, I think we are, we're seeing change happening before our eyes. One of the factors that occurs to me is that I think for many of the brands, they're recognizing, first of all, their product has become prohibitively expensive for so many consumers. And the industry has lost millions of consumers, uh, over the past, even the past five years, um, because of rising prices.

And of course, one of the reasons for rising prices is these vast networks of boutiques that brands have been, uh, establishing in countries. All over the world. I mean, dozens, hundreds, sometimes. And at some point, the cost of the opex and the CapEx has to [00:55:00] be passed on to the consumer. Now, I think we're gonna start to see a recessionary, um, element.

I think we're gonna see the boot, the boutiques start to recede in number. I know some brands already starting to close some of their boutiques down, which is good news for the multiples, like, um, watches the Switzerland group like ra. Um, and it may well be that in five years time, the, the marketplace looks quite different again.

David Sadigh: Yeah, no, I'm with you. And also taking into account the, the customer perspective. And we, we can really feel that, uh, if we put ourselves into the shoes of a customer, that it's probably easier to go to a multi-brand retailer and try to get a. Let's say a bigger, wider, uh, uh, range of options than necessarily having to go directly to a, a one, uh, branded, uh, branded store.

So it seems to me that the world won't evolve to a black or white option, but that probably gray will be the answer.

Robin Swithinbank: Yeah. And actually one of the things I think that Brian said, which points to that was this idea that some of the Rolex CPO customers go in through the front door of the boutique looking for a new watch, and then end up buying something from the pre-owned, uh, floor, [00:56:00] in this case, the whole floor. They got devoted to pre-owned.

Um, that would suggest that. This idea that a customer walks into the store knowing what they want, only stretches so far. And actually, therefore, the multiple still has a story to tell. It still has a role to play in the market. Because even if a customer walks in saying, I'm gonna buy a Rolex, or a Patek, or a Cartier, or whatever it is, if there's choice in front of them, they may buy all sorts of things.

They might go and buy A. Lange or a vacheron or jaeger lecoultre Jaga, you know, also Jaga extraordinary if I can try and say that with a French accent. Um, 

David Sadigh: You have a cute little French accent by the way.

Robin Swithinbank: Um, but the, um, the point being that that choice still has a value. Um, and I don't think that's gonna change.

David Sadigh: I'm with you.

Robin Swithinbank: The only other thing that he talked about, which I, which did interest me, was this idea that the industry is in rude health. Um, I don't know whether I share that view at the moment. I appreciate what he was saying about the compound annual growth rate, that the graph over a period of time is actually still on an upward trajectory.

Um, that it's not, when you look at volumes, it's on a very significant downward trajectory. I know that we're comparing, I dunno whether we're comparing apples with apples there at this. Um, I'm not ne, I'm not an eco, uh, an eco economist, um, but, uh, my, my, [00:57:00] my hopes of a recovery are perhaps not as, uh, as high as Brian's might be.

What's your perspective on that?

David Sadigh: It's a, it's an interesting one once again. Uh. I under the impression that the case of watches of Switzerland is probably a bit different, uh, from the one of like, uh, some of the other retailers such as like, uh, multi-brand retailers such as. The Rolex CPO in itself is a major opportunity. Let's remind that the CPO market is, uh, estimated to be pre-owned market around 25 billion, uh, per year.

Uh, so obviously, uh, if you end up being the one, uh, with like the, the right Rolex CPO assortment, this can be a major, major addition to your top line. Um, so I'm just wondering, you know, uh, is it something that is replicable across all the other brands? Uh, will at some point Rolex decide to open their own boutiques, know that they have learned the job of being a retailer.

Robin Swithinbank: Much to discover and we will of course, uh, see watches Switzerland group's results at the end of April. So I'm sure we'll return to this subject, but for now, that's a wrap on episode two. Thanks, David.

David Sadigh: Thank you, Robin.

Robin Swithinbank: Thank you for listening to the Luxury Society Podcast. If you've enjoyed this episode and would like to hear [00:58:00] more, don't forget to subscribe. And if you want to go deeper into any of these topics, check out luxury society.com where you'll find stories, insights, and profiles that unpack what's going on in the world of luxury right now.

I've been your host, Robin Swithinbank, and this has been the Luxury Society Podcast available on Apple, Spotify, and wherever you get your podcasts.